Returned Goods Export - Taxes?

Morturus

Hiyas,

My company (in Canada) recently returned some parts that weren't needed to the manufacturer in Germany. I just received the invoice from the shipping/customs clearing company and see we were hit with the 19% Value Added Tax. I have next to no international shipping experience (yay for doing 10 different jobs in a small company!) and don't know how to handle this one.

Should the VAT be applied to returned goods? Can anyone explain it to me or point me to something I can read about the subject?

Thanks!

scrivenerjones

I will talk through it in terms of bookkeeping because that is how I think. You receive some goods, but record no entries because you are a cash basis business (probably). Then you decide to return the goods, and ship them off. Finally you get an invoice for the original purchase, but since you don't have or want the goods anymore you incur no liability--either VAT payable or accounts payable. So nothing happens.

If you are on an accrual basis for some reason, you would make an entry to record the increase to tax provision and to inventory(1) and the associated liabilities (accounts payable, VAT payable). When you return the goods, you then make another entry that's the reverse of the first one to wipe out the stuff from your books. Either way you are clear.

And if the German taxation authority comes after you, just show them proof that you returned the stuff and you should be okay. If you're really concerned though, or it's a lot of money, consult a tax professional.

(1) unless you use a periodic inventory system in which case fuck you!!

chromdom

You should also ask the customs clearance company; they should be able to tell you definitely why you have to pay it.
I'm in the export field, and I'll tell you this: customs clearance companies will tack charges on for anything they can think of.
Also, what terms are you moving under? Any chance of getting the supplier to take those charges?

matt has a problem

I'm going to guess it's a mixup on the custom house's part. They saw a shipment of X items for $Y amount, and applied the amount of tax to those items they'd normally incur were a company in Germany buying them from a company in Canada. You need to contact the shipping company and tell them that it was a return to the manufacturer, not a sale.

Morturus

I spoke with the shipping company and they said it didn't matter that the parts were returned, they had a value, and were taxed accordingly. I'm in the middle of trying to get the clearance documents from them to see what values they used.

I also spoke with the supplier and they mentioned that had they been able to put it through their system they could've applied the VAT to their future sales (or something like that). But having been already cleared and finished they said we were SOL.

Terms moving under? You've lost me. I believe I unwittingly chose us as the responsible party for duties/taxes/etc on the shipping form. Time to tell the boss I screwed this one up perhaps?

Thanks for the suggestions.

Cauld

Morturus wrote: »

I spoke with the shipping company and they said it didn't matter that the parts were returned, they had a value, and were taxed accordingly. I'm in the middle of trying to get the clearance documents from them to see what values they used.

I also spoke with the supplier and they mentioned that had they been able to put it through their system they could've applied the VAT to their future sales (or something like that). But having been already cleared and finished they said we were SOL.

Terms moving under? You've lost me. I believe I unwittingly chose us as the responsible party for duties/taxes/etc on the shipping form. Time to tell the boss I screwed this one up perhaps?

Thanks for the suggestions.

I'm not familiar with the Canadian VAT, but I thought it stood for "Value Added Tax". Obviously you didn't add any value to the part you received and shipped off without doing anything to. Thus there shouldn't be anything to tax. Maybe there's someone at a post-office type place you could ask, they must deal with this kind of thing pretty often.

kaliyama

Cauld wrote: »

Morturus wrote: »

I spoke with the shipping company and they said it didn't matter that the parts were returned, they had a value, and were taxed accordingly. I'm in the middle of trying to get the clearance documents from them to see what values they used.

I also spoke with the supplier and they mentioned that had they been able to put it through their system they could've applied the VAT to their future sales (or something like that). But having been already cleared and finished they said we were SOL.

Terms moving under? You've lost me. I believe I unwittingly chose us as the responsible party for duties/taxes/etc on the shipping form. Time to tell the boss I screwed this one up perhaps?

Thanks for the suggestions.

I'm not familiar with the Canadian VAT, but I thought it stood for "Value Added Tax". Obviously you didn't add any value to the part you received and shipped off without doing anything to. Thus there shouldn't be anything to tax. Maybe there's someone at a post-office type place you could ask, they must deal with this kind of thing pretty often.

uh...no. consumers pay VAT too.

Anyway, as anyone who's traveled has known, retail tourists can get VAT tax refunded on goods they have purchased. I have no idea how it works for commercial importers. Googling VAT tax import refund gets a lot of UK gov sites - but if you trawl those search terms enough you should find something.

scrivenerjones

Cauld wrote: »

I'm not familiar with the Canadian VAT, but I thought it stood for "Value Added Tax". Obviously you didn't add any value to the part you received and shipped off without doing anything to. Thus there shouldn't be anything to tax. Maybe there's someone at a post-office type place you could ask, they must deal with this kind of thing pretty often.

19% is the German VAT, not the Canadian one.

chromdom

Morturus wrote: »

I spoke with the shipping company and they said it didn't matter that the parts were returned, they had a value, and were taxed accordingly. I'm in the middle of trying to get the clearance documents from them to see what values they used.

I also spoke with the supplier and they mentioned that had they been able to put it through their system they could've applied the VAT to their future sales (or something like that). But having been already cleared and finished they said we were SOL.

Terms moving under? You've lost me. I believe I unwittingly chose us as the responsible party for duties/taxes/etc on the shipping form. Time to tell the boss I screwed this one up perhaps?

Thanks for the suggestions.

Terms are INCOTerms. EXW and PPD are the most common, at least where I see it. Did you guys pay for the shipping? It sounds like you wanted to go DDU: Deliver Duties Unpaid. Then the consignee (the folks getting the shipment) would be on the hook for the taxes and duties.

EDIT: Who handles your shipping? Do you know who the customs clearance company in Germany is? I'm just curious.

EDIT2: Yeah, your company may be screwed on getting any of the money back if it's already cleared and returned. Getting money back from another country when everybody else already has everything they want is... tough. You might want to negotiate credit for the tax you're paying against future transactions.